* Dean Foods' Morningstar draws strategic, PE interest
* Final bids for the dairy unit due in weeks-sources
* Morningstar seen valued in $1 bln to $1.5 bln range
By Soyoung Kim and Greg Roumeliotis and Olivia Oran
NEW YORK, Oct 25 Dean Foods Co's
Morningstar business has attracted takeover interest from
Michael Foods and Mexican dairy company Grupo Lala, people
familiar with the matter said, in a deal that could be valued in
the $1 billion to $1.5 billion range.
Private equity firms including Apollo Global Management LLC
are also pursuing Morningstar, which makes creams,
coffee creamers and other dairy products mostly under private
label or store brands, the people said.
Dean Foods confirmed a Reuters report last month that it is
seeking a buyer for the Morningstar unit, a move that could
presage a break-up of the largest dairy company in the United
The Dallas, Texas-based company, being advised by investment
bank Evercore Partners Inc on the sale process, is
expected to receive final bids for Morningstar in coming weeks,
the people said.
Dean Foods, Grupo Lala and Michael Foods declined to
comment. Apollo did not immediately respond to requests for
Mexico's Grupo Lala sells yogurt, milk and other dairy
products. U.S.-based Michael Foods, which sells egg and dairy
products, refrigerated grocery and potato products, is owned by
GS Capital Partners, the private equity arm of Goldman Sachs
Dean Foods is also spinning off its WhiteWave unit in an
initial public offering this week. It priced 23 million shares
at $17 each on Thursday, raising $391 million.
The spin-off of WhiteWave, which makes Horizon Organic milk
and Silk soy milk, and a sale of Morningstar would leave Dean
with its Fresh Dairy Direct business, which sells milk under
regional and local brands.
Morningstar had net sales of $1.3 billion in 2011, making up
10 percent of Dean's overall sales of $13.1 billion.
Fresh Dairy Direct is Dean's largest business, with annual
sales of $9.6 billion, but it is the most challenged, since
selling milk is a low-margin business.
The company's stock price tumbled 27 percent in July amid
concerns over rising dairy commodity costs but then rebounded
after Dean announced the IPO of WhiteWave and reported
stronger-than-expected quarterly results.
Dean's costs are dependent on a range of volatile
commodities from fuel to dairy and passing on those costs to
consumers is not easy, since there is little brand loyalty and
consumers often choose the cheapest brand.
In 2011, the company took a $1.9 billion charge to write
down goodwill in the dairy business, which it had built up
through acquisitions over the years. Falling demand and prices
over several years had hurt the value of that business.
(Reporting by Soyoung Kim and Greg Roumeliotis, Additional
reporting by Olivia Oran and Martinne Geller in New York;
Editing by Steve Orlofsky)